Apple's iPhone 7 more expensive to make: IHS Markit

Apple is spending more to manufacture its iPhone 7 smartphone than predecessor iPhone 6S due to features such as a bigger battery and larger storage capacity, according to a teardown by IHS Markit.

Including $5 in basic manufacturing costs, total cost to manufacture the iPhone 7 mobile rises to $224.80, $36.89 higher than the business research provider's estimates for the iPhone 6S.

Apple retails an unsubsidized 32GB iPhone 7 at $649.

The company unveiled the iPhone 7 with high-resolution cameras and no headphone jack at its annual launch on Sept. 7.

Mark Neuling | CNBC

Apple iPhone 7 on display after the Apple Event on Sept. 7, 2016 in San Francisco.

IHS Markit also said on Tuesday the iPhone 7's Bill Of Materials (BOM), a financial estimate of the raw materials used, was "in line" with flagship smartphones made by rival Samsung Electronics (005930.KS) but Apple ekes out better margins.

"All other things being equal, Apple still makes more margin from hardware than Samsung, but materials costs are higher than in the past," said Andrew Rassweiler, senior director of cost benchmarking services at IHS Markit.

IHS Markit has not yet performed a teardown analysis on the larger iPhone 7 Plus.

Supplies of Apple's iPhone 7 Plus have been exhausted in all shades, and the smaller iPhone 7 has also sold out in the new jet black color, the company said last week.

Yet, in some markets, such as China, interest in the new phone has been muted, as cheaper local brands amp up their design and marketing.